In a time of increasing scrutiny over the cost-benefit analysis of corporate sponsorship and corporate entertaining, a number of businesses are looking to the corporate charity partnership to deliver brand benefits and awareness whilst at the same time providing donations to a charity where there the business sees an alignment of values. It can be, if carefully managed, a win-win for both parties.
For many businesses, the charity partnership can assist with developing CSR credentials and potentially increase employee engagement in a cause they can really get behind. For the charity, it can be another means to raise well-needed funds whilst assisting in reaching a wider audience, and more generally raising awareness of and championing your 'cause'. As I say, a win-win for everyone!
One perhaps less well-travelled corporate partnership is where a business agrees to make a donation to a named charity on the sale of that business's product. Many businesses, in simple terms, place the charity’s name and branding on one of their products with the intention of sharing a percentage of the profit on the sale of that product with the charity.
Whilst there are obvious benefits, for those considering this as an option, there are perhaps some less well-known regulatory requirements that both the charity and your chosen business will need to deal with when entering into this type of donation arrangement.
Products indicating some or all of the proceeds of a sale are to be given to a named charity
Probably one of the most well-known examples of the above type of arrangement is a high street retailer selling Christmas cards where a stated proportion of the sales of those cards is to be donated to a named charity. However, charity names have found their way on to all sorts of products, including those in the food and drink and clothing sectors.
Where a business chooses to place a charity’s name and branding on one of its products with the intention of sharing a percentage of the profit on sale of that product with the charity, for the purposes of Scottish[1] charity legislation, the business will be deemed to be what is termed a 'commercial participator' [2], and that business is required to enter into a 'commercial participator agreement' with the charity and is required to pass any monies raised within a designated period[3].
The regulations and the requirements – what do these mean for the charity and the business?
The Charities and Trustees Investment (Scotland) Act 2005 (the Act) makes clear there are two key areas to be addressed in any commercial participator arrangement. These relate to:
- written agreements between the business and your charity, and
- solicitation statements.
The Act sets out that it is unlawful for a commercial participator to represent that a donation will be made to a charity except in accordance with a written agreement between the parties; and the Charities and Benevolent Fundraising (Scotland) Regulations 2009 sets out what it needs to contain, including setting out who the parties are; its duration and conditions on variation and so on.
In particular, the agreement must set out:
- the main objectives of the agreement and the fundraising methods chosen;
- the details of how any split will be determined if there is more than one charity involved;
- how any remuneration or expenses that the commercial participator is to receive will be determined; and
- details of the payment amount where it is a proportion of proceeds from the sales or services or the percentage of donations made resulting from the sales or services.
The legislation also requires specific solicitation statements[4] to be made to the public where the commercial participator is making a donation to charities (these statements will vary depending on whether the ask is for a specific charity, or a general fundraising ask). Where they are raising funds for a specific charity, a statement on their product will need to include:
- the name of the charitable organisation and its charity number(s) (including its English number, where it is dual registered);
- where fundraising relates to more than one charitable organisation, details of the proportional split of each;
- if the organisation is to receive remuneration (how that is determined); and
- the actual amount that will be donated to the charitable organisation[5].
The benefits of such agreements
Whilst it may appear there is a fair bit to consider here, the benefit of a commercial participator arrangement is twofold: it likely increases donations for the charitable organisation alongside awareness raising of your cause whilst increase sales for the business alongside enhancing goodwill by demonstrating community social responsibility.
Anything else to consider?
Absolutely! Here are just a few of the things to consider:
Brand Reputation: In entering into an arrangement with a commercial participator, you are, in effect, entrusting them with your brand and reputation – a brand that your charity has spent years developing. It is therefore important to do some due diligence before signing up to such an arrangement and make sure that the values of that business truly do align with those of your organisation. Your brand and reputation have taken years of hard work to develop but can easily be easily undermined by choosing the wrong business.
Intellectual Property: If your charity and the commercial participator agree on any new slogans or logos as part of any promotion, think carefully about who is to own any IP that might arise. Such IP could prove quite valuable for future campaigns. When the campaign has ended, will your charity still be able to refer to the campaign and use the brand of the company? Being able to continue to use the name of the commercial participator may too prove valuable long after the promotion has ended.
How can we help?
Please contact Valerie Armstrong-Surgenor if you would like assistance in relation to fundraising and commercial participator agreements or any related charity law queries.
[1] Similar rules apply in England & Wales.
[2] Section 79 of the Charities and Trustees Investment (Scotland) Act 2005 (the Act) makes it clear that a “commercial participator” includes a company (or person) who carries on business for profit, whose business is not focused on fundraising, and as part of their business sales or service contributions will be made to a given charitable (or benevolent) organisation or applied for charitable, benevolent or philanthropic purposes.
[3] Commercial participators holding any money, for the benefit of the charity must, as soon as reasonably practicable after its receipt and in any event not later than 28 days after that receipt transfer to the charity or pay into an account of the charity.
[4] The nature of solicitation statements will vary depending on a number of factors.
[5] Other requirements may include stating the amount received for the goods provided by the commercial participator and the proceeds from any promotional venture undertaken by a commercial participator.
